Africa Market Update -December 2014

MARKET UPDATE – AFRICA | November 2014
-2.2 %
Uganda shilling
depreciation
month-on-month
-8.5 %
Uganda shilling
depreciation
year-on-year
DEBT MARKET UPDATE
After six months of a steady downtrend in
inflation, there has been a thirty bps surge,
month-on-month, to 2.1% in November
2014. This conforms to our forecast in October
2014 of imminent uptick driven by
trends in the food and energy indices that
have been inching upwards. We expect inflation
to remain on an up-trend in the near
future given a likely lag impact of four consecutive
months of a rise in the food and
energy indices.
Inflation Trend
Appetite for domestic borrowing is likely
to diminish in the near future as revenue
mobilization registers high performance.
Measures such as introduction of duty on
agricultural imports in the FY14/15 budget
are bound to see the government realize its
revenue target, scaling down need for domestic
borrowing.
Uganda Revenue Authority has reported a
99.8% performance rate in revenue mobilization
in the first quarter of 2014/15 having
collected USD 1.0 billion. Domestic taxes,
for the period, registered 100.0% performance
rate raking in USD 549.8 million.
Shilling Propped by Liquidity Mop Up
Bank of Uganda issued a USD 103.5 million
repo enabling the sliding shilling to exhibit
a new found resilience at the tail end of
November 2014. We expect the shilling to
maintain resilience given the traditional inflow
of payment for coffee exports in the
fourth quarter of the year.
Uganda Shilling vs USD Exchange
Source: Bank of Uganda, StratLink Africa
Despite the fact that inflation stands at a
marked 330.0 bps below the October 2013 –
October 2014 average of 5.4%, anticipation
that this could be the beginning of a steady
rise is likely to leave investors pricing in expectations
in fixed income investments.
Yield Curve Trend
Source: Bank of Uganda, StratLink Africa
In line with the mop up, the interbank rate
has risen in November 2014 indicative of
tightening liquidity in the money market.
The interbank rate has risen by 70.0 bps
month-on-month and 60.0 bps year-to-date
closing November 2014 at 9.4%.
Source: Bloomberg, StratLink Africa
www.stratlinkglobal.com
StratLink Africa Ltd.| 16